Sample answers for the case part of the exam.
In this file you will find verbatim answers from two students who took the practice exam in December
2011. The document shows an answer for each question in the phase from both students and the
answers are den

Commerce 298
Lecture 7B:
Market Efficiency
Objectives
By the end of this class, you should be able to:
• Distinguish between the three forms of the
Efficient Markets Hypothesis.
• Discuss the implications of each form.
• Review some of the evidence on mar

Commerce 298
Lecture 7A: Stocks
Objectives
By the end of this class, you should be able to:
• Interpret information contained in a stock
quotation.
• Explain what a P/E ratio represents.
• Calculate the realized return from a stock
investment. Differentia

Commerce 298
Lecture 6B:
Stock Valuation
Objectives
By the end of this class, you should be able to:
• Describe the dividend discount formula.
• Calculate the stock price under assumptions
of zero or constant growth.
• Use stock valuation formulas to esti

Commerce 298
Lecture 6A:
Bonds & Stocks
Objectives
By the end of this class, you should be able to:
• Determine an arbitrage strategy to profit from
bond mispricing.
-• Describe the rights of common and preferred
shareholders.
• Identify the differences b

Commerce 298
Lecture 5B:
Bonds
Objectives
By the end of this class, you should be able to:
• Distinguish between nominal and real
interest rates and know which rate to use.
• Solve savings and investment problems
involving inflation.
• Explain the Law of

Commerce 298
Lecture 5A:
Bonds
Objectives
By the end of this class, you should be able to:
• Calculate the realized rate of return after
holding a bond and reinvesting the coupons.
• Explain why the realized rate of return on a
bond may differ from the bo

Commerce 298
Lecture 4B:
Bonds
Objectives
By the end of this class, you should be able to:
• Find the market price of a bond given its yield
to maturity (YTM).
• Set up the equation to solve for a bond’s
effective periodic yield and, by extension, its
YTM

Commerce 298
Lecture 3A:
Annuities and Perpetuities
Objectives
By the end of this class, you should be able to:
•
•
•
Adjust PV and FV calculations to deal with
“moving annuities” or “annuities due”.
Convert interest rates, regardless of how they
are quot

Commerce 298
Lecture 3B:
Loans and Bonds
Objectives
By the end of this class, you should be able to:
• Identify and value perpetuities.
• Perform calculations for pure discount loans,
interest only loans, and amortized loans.
• Calculate the amount owing

Commerce 298
Lecture 2B:
Annuities
Objectives
By the end of this class, you should be able to:
• Describe the characteristics of an annuity.
• Perform PV and FV calculations for standard
annuities.
• Determine whether to use PV or FV in
annuity calculatio

Commerce 298
Lecture 2A:
Interest Rates and Compounding
Objectives
By the end of this class, you should be able to:
• Define and calculate effective periodic rates
of interest.
• Distinguish between APR rates and effective
periodic rates.
• Determine the

Commerce 298
Lecture 1B:
Valuation of Cash Flows
Objectives
By the end of this class, you should be able to:
• Distinguish between simple and compound interest.
• Explain why when you receive a cash flow partly
determines how much that cash flow is worth.

Commerce 298
Lecture 12A:
CAPM
Objectives
By the end of this class, you should be able to
Trace out a combination line by changing the
portfolio weights.
Identify efficient portfolios and the efficient
frontier.
Add a riskless security to your analysis